25 RELATED AND INTER RELATED PERSONS
In the context of the Companies Act, the relationships between people and juristic persons are delineated to ensure proper governance, control, and structure of companies. The relationships defined in the Companies Act include:
1. Relationships between Natural Persons:
- Two individuals are considered related if they are married, live together in a relationship akin to marriage, or are separated by no more than two degrees of natural or adopted consanguinity or affinity. This includes immediate family members like children, siblings, and parents.
2. Relationship between a Natural Person and a Juristic Person:
- A natural person is related to a juristic person (e. g. , a company or trust) if the individual directly or indirectly controls the juristic person. Control is determined based on the ability to exercise majority voting rights or appoint directors who control the company.
3. Relationships between Juristic Persons:
- Juristic persons (e. g. , companies, trusts) are related if one controls the other, or they are subsidiaries or fellow subsidiaries under the control of a common affiliate. This relationship is crucial for understanding corporate structures and subsidiary arrangements.
4. Inter-Related Persons:
- This term is used when three or more people or entities are involved in a chain of relationships. For instance, if person A is related to person B, and person B is related to person C, then all are considered inter-related. This structure helps to outline complex business networks.
5. Control Definition:
- Control over a juristic person is broadly defined to include scenarios where an individual or group can dictate the company’s operations, whether through shareholding, voting rights, or management appointments.
These definitions help ensure clarity in operational authority and accountability within and across corporations and are designed to safeguard minority interests and enhance corporate governance.
| Type of Relationship | Description |
|---------------------------------------------------|----------------------------------------------------------------------------------------------------------------------|
| Natural -> Natural | Individuals related by marriage, cohabitation, or within two degrees of consanguinity (e. g. , siblings, parents). |
| Natural -> Juristic | A natural person directly or indirectly controls a juristic person (e. g. , significant shareholding or influence). |
| Juristic -> Juristic | One juristic person controls another (e. g. , parent company and subsidiary), or both are under common control. |
| Inter-Related Persons | Three or more entities in a relationship chain (e. g. , A -> B -> C), showing connectivity through cascading influence. |
| Control over Juristic | Involves having majority voting rights, the ability to appoint/remove directors, or other significant influence. |
This table categorizes and summarizes the hierarchical and influence-based relationships outlined in the Companies Act, thereby clarifying structural and control dynamics within and among corporate entities.